EQUITIES
We see a pick-up in three important sectors, which creates substantial employment in India which are Auto, Real estate and IT, where we have seen good traction is last few weeks.
Response for public offerings, fund raising on CPs and CDs at historical lower levels shows liquidity is awash.
Ideally lower interest rates, appreciating rupee, lower oil prices, lower inflation, lower taxes and supportive Govt policies would help corporate to report better numbers once demand picks up.
Today there is hardly any incentive for people to save looking at interest rates available for any investment horizon.
SEBI s decision about multicap funds created some clutter last month but hopefully it will get resolved by SEBI giving alternative or option to fund houses. Thefunds may not be made to sell excess sitting in large cap and buy midcap and small cap stock thoughtlessly. We have communicated to our clients immediately and did call with AMFI Chairman Mr. Nilesh Shah also to address this to our privileged clients. Our view is clear – any buying in midcap and small caps will happen based on merits than by virtue of any ruling.
We have seen good traction for IT, Pharma, and consumption stocks in the last month exactly as per expectation set out in our September month commentary. IT sector has given ~36% in 1 year and Pharma stocks have given ~63% in a year.
Banking and finance sector has not participated in this rally much and we don’t believe any strong economic recovery without participation by banking and finance.
Government is doing all its bit tocalm the current stress in the economy by taking slew of measures from time to timerather than just finishing ammunition at one go.
Most of the fund have underperformed Nifty as out of the 2600 points rally since March, Reliance Ind alonecontributed 800 points.
Maharashtra Government has announced concession on stamp duty payable on house properties, it’s a welcome move to give necessary fill up to Real Estate Sector.
US elections could bring some volatility for global markets and for India, we feel it is going to be short term phenomena. Results’ season will start soon and lower NPAs or lower number of borrowers approaching for restructuring for banks and NBFC is necessary for next leg of rally.
We feel there may still be quite some timefor vaccine to be discovered and challenges for few sectors are here to stay like hotels, airlines, tourism, event management and theatres, where recovery is still some distance away.
We don’t want to paint very rosy picture as wholistic growth is important for any economy. Lock down has changed the way businesses are done permanently this also led to emergence of new economy stocks like Affle India, Info Edge and India Mart etc.
FPIs are in withdrawal mode in the second part of last month after investing close to 4 billion in past few months.
We don’t expect any major correction during the month. Sector rotation will continue till market findsa new trigger to propel further. This fairly valued market will await any upgrade in earnings growth, pick up in consumption and FDI flows going ahead.
Government should keep its borrowing under check to keep interest rates lower for longer period of time. Current account surplus (creditsto services exports) and narrowing trade deficit, huge forex reserve and stable currency bode well for economy.
Pravin Bhalerao, Managing Partner, Pranitya Wealth Advisors
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